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Aluminum prices surge to highest level since 2011 as US sanctions on Russia take out big producer

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A worker loads a liquid electrolyte into the electrolysis bath at the Krasnoyarsk aluminum smelter, operated by United Co. Rusal, in Krasnoyarsk, Russia.

Andrey Rudakov | Bloomberg | Getty Images 

A worker loads a liquid electrolyte into the electrolysis bath at the Krasnoyarsk aluminum smelter, operated by United Co. Rusal, in Krasnoyarsk, Russia.

Aluminum prices surged to their highest level in six years on Monday, extending a recent rally that follows the U.S. sanctioning of Russian aluminum giant Rusal.

The metal traded as high as $2,403 per ton on the London Metal Exchange, before holding more than 4 percent higher at 2,379.

On April 6, the U.S. slapped sanctions on several Russian oligarchs, officials, businesses and agencies, including Rusal. The sanctions freeze all of Rusal’s assets that are under U.S. jurisdiction.

Rusal — which saw its stock hit a record low on Monday — is one of the largest aluminum producers in the world. The company’s collapse has the potential to take a large chunk of aluminum supply from the market. In fact, Rio Tinto — one of the largest mining companies in the world — said Friday it would declare force majeure on some of its contracts with Rusal.

“The main thing that has been a catalyst behind aluminium has been the issues around the sanctions against Rusal which will make the market tighter,” ETF Securities analyst Nitesh Shah told Reuters. “In addition to that is the weaker dollar and the general upside for industrial metals in recent days that is working in aluminium’s favor.”

Aluminum’s surge comes more than a month after President Donald Trump slapped a 10 percent tariff on aluminum imports to the U.S.

Trump bragged the tariffs were not having a negative effect on the U.S. economy.

He said in an April 6 tweet: “Despite the Aluminum Tariffs, Aluminum prices are DOWN 4%. People are surprised, I’m not! Lots of money coming into U.S. coffers and Jobs, Jobs, Jobs!”

Aluminum prices were down for the year when Trump sent his tweet. However, prices have skyrocketed more than 20 percent since the U.S. unveiled sanctions against Russia.

The Washington Post reported, citing people familiar with the matter, that Trump walked back a comment made by U.S. ambassador Nikki Haley about additional sanctions being implemented, noting he was not yet comfortable taking that course of action. Haley said Sunday new sanctions on Russian entities would be announced Monday.



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The market is now pricing in almost a 50/50 chance of four rate hikes this year

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Federal Reserve Chairman Jerome Powell speaks at a news conference following the Federal Open Market Committee meetings in Washington, U.S., March 21, 2018.

Aaron P. Bernstein | Reuters

Federal Reserve Chairman Jerome Powell speaks at a news conference following the Federal Open Market Committee meetings in Washington, U.S., March 21, 2018.

The market is finally coming around to the idea that the Federal Reserve this year will be raising interest rates a total of four times.

Though some big forecasting firms on Wall Street for months have been predicting a more aggressive Fed, traders thus far had been anticipating three moves this year — the increase already approved in March, plus two more, likely in June and September.

However, the fed funds futures market Monday morning gave almost a 50 percent probability that the central bank would move one more time in December.

The CME’s FedWatch tool, which has been a reliable gauge of the Federal Open Market Committee’s actions, assigned a 48.2 percent chance in early trade. The move toward a more aggressive Fed came as the benchmark 10-year Treasury note yield hovered around 3 percent, which multiple bond experts have predicted would be a key level.

The probability had been just 33 percent a month ago and less than 40 percent as of late last week.

The CME computes the probability of a rate hike by taking the end-month futures contract, subtracting the level at the beginning of the month, and dividing that by 25 basis points, which is the assumed level of each rate hike. (A full explanation of the process is here. The fed funds contracts are here. To get the implied funds level for each month, subtract the contract level from 100.)

FOMC members themselves, in their latest forecast in March, still indicated three increases in the funds rate this year. However, with increasing signs of inflation picking up and as the market begins to price in more hikes, the committee could begin to set its sights higher.



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Bitcoin extends post-Tax Day rebound to $9,000

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Bitcoin rebounded above $9,000 over the weekend as the cryptocurrency extended post-Tax Day gains.

The digital currency traded near $8,878 as of 4:28 p.m. ET Monday, up more than $950 since last week, according to CoinDesk. Bitcoin has fallen more than 30 percent this year, and pundits blamed much of that price pressure on U.S. tax obligations.

Tom Lee, co-founder and head of research at Fundstrat Global Advisors, estimated U.S. households owed $25 billion in taxes on their cryptocurrency holdings after bitcoin’s rise to near $20,000 in 2017. The Internal Revenue Service views bitcoin and other cryptocurrencies as property, meaning profits from transactions are subject to capital gains tax.

Lee, the only major Wall Street strategist to issue bitcoin price targets, predicted bitcoin would recover after U.S. investors submitted their taxes and has a $20,000 price target for this year.

Bitcoin’s one-week rebound

Source: CoinDesk

Monday’s price marked a roughly 15 percent increase from the low of $7,834 hit Tuesday, which was the original deadline to file taxes. After the agency’s web page for making the payments crashed Tuesday, the IRS gave taxpayers another day to submit returns.

“We believe the ‘winter’ is ending for Bitcoin, as the crypto to fiat pressures from tax day subside, and as headline risks seem to be fading,” Lee said in a note to clients Friday.

Other “alt-coins,” or cryptocurrencies other than bitcoin, were also trading higher Monday. Ethereum, the second biggest cryptocurrency by market capitalization, was up 3.6 percent, while ripple rose roughly 1 percent, according to CoinDesk.

Bitcoin cash, which spun off from bitcoin in July, rose 17 percent Monday. The cryptocurrency has jumped 80 percent over the past week after developers announced a spin-off of the cryptocurrency, known as a “fork,” planned for May 15.



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Alcoa shares dive 12% after US reconsiders penalties against Russian competitor

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“Rusal has approached us to petition for delisting. Given the impact on our partners and allies, we are issuing a general license extending the maintenance and wind-down period while we consider Rusal’s petition,” Mnuchin added.

The latest decision from the Treasury Department sent aluminum prices swinging more than 5 percent lower.

Moscow’s Rusal was targeted during a wave of harsh U.S. sanctions earlier in April, freezing all of the company’s assets within U.S. jurisdiction.

Deripaska, a billionaire oligarch who previously ran Rusal, was also slapped with sanctions and has been charged in special counsel Robert Mueller‘s investigation regarding Russian involvement in the 2016 U.S. presidential election.

Alcoa did not wish to comment for this story at the time of its publication.



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